Profitability of Listed Ghanaian Banks Determined by the Stylized Facts

摘要

Background and Objective: The financial performance of firms have been postulated to be influenced by factors internal to the firm as well as those external to the control of the firms? management. The study examined internal and external determinants of bank profitability in Ghanaian banking industry. Materials and Methods: A panel data of 6 banks listed on the Ghana Stock Exchange was analyzed over the period 2010-2015, using pooled regression models. Results: The statistical results revealed that major determinants of bank profitability in Ghana include the bank capital adequacy, liquidity, total assets and real interest rate. Bank liquidity has significant negative effect on both return on assets and return on equity, while bank operating efficiency has negative and significant influence on only return on equity. On the other hand, while bank capital adequacy was positive and significant for determining both return on assets and return on equity, that of bank total assets has positive and significant influence on only return on assets. Conclusion: With respect to the external factors, the results show that real interest rate has significant positive relationship with both return on assets and return on equity, making it a key determinant of bank profitability unlike gross domestic product. It is recommended that banks should consider their interest rate carefully so that, bank performance can be enhanced. Also, efficient and effective liquidity management should be implemented by bank managers to ensure that banks do not become insolvent. Banks should therefore be encouraged to look beyond local market and strategically expand their operations to other markets and sectors of the economy. The government should implement policies to stimulate the growth of the economy to facilitate financial transactions.